Bitcoin and Cryptocurrency : The Future of Money
What if no one, not even the Bank and the Government knows how much money have you stored in your account! Got your nerves curious right. So, here comes the evolution and revolution in the world of money and banking. Cryptocurrencies and Bitcoins are revolutionizing the finance system around the world, by being called upon ‘The Future of Money. Anyone with an internet connection can trade, spend and empower money “without even the Government knowing about it”. We all know how the money system has changed its face over the phases from earlier times to now. But are these digital currencies really, The Future of Money! Well, as far as the sender and receiver agree. However, there are still a lot of things you need to know about. Though the Cryptocurrency and Bitcoin terms have been in news since their emergence many are still unaware of these and the reason behind why have they been a ‘topic of concern’.
What is Cryptocurrency ?
In simplest terms, Cryptocurrency is a virtual or digital currency, which works as a medium of purchase of goods and services and to make online payments. But, unlike, other modes of online payment as PayPal, Google Pay, etc., Cryptocurrency is decentralized* and is based on the science of Cryptography*.
- Decentralized- Cryptocurrency is not controlled by any third body interference, which means
while doing payment, your money directly gets transferred without any involvement of banks,
authority or Government.
- Cryptography- a way of securing all transactions and informations, using specially designed
computer codes. Cryptocurrencies are encrypted with such complicated puzzles, that are not easy to hack and crack.
Types of Cryptocurrency:-
Though Bitcoin did not get legal tender worldwide its launch has triggered the invention of many more cryptocurrencies. So, there are mainly three main types of Cryptocurrency-
Commonly, abbreviated as “BTC”, Bitcoin is the first-ever blockchain-based* cryptocurrency, that works on a peer-to-peer bitcoin network without the need of any middleman. It was created and put forth by Santoshi Nakamoto (anonymous programmer) in January 2009. Though prompted by the launch of many other cryptocurrencies, bitcoin still remains the most valuable and popular amongst all.
- Blockchain– a decentralized technology that manage and record all the transactions done and
spread it to all the network of computer systems, which makes it quite impossible to do any sort of mischief or fool the system.
How do Bitcoin works?
Bitcoin is not any kind of physical amount or cash but a digital coin or currency which means, each of it is basically a file, stored in a ‘digital wallet’ app, in any smartphone or computer. Its transaction is way simpler – you can send Bitcoins (or a fraction of it) to others’ digital wallets and likewise, they can do the same through the internet, without any hustle and interference. All transactions are verified and secured by a massive amount of computing power and kept on a public ledger that everyone has transparent access to.
The information on the blockchain is encrypted, which everyone can see but only the owner of it can decrypt or decode it through their ‘private key’*.
- Private key- Once you own your digital currency, it’s your private key which grants you permission and access to your cryptocurrency.
As we know, there is not any involvement of the Government or bank in this whole transaction. Then how does this processing works!
Here is the answer –
Blockchain, the public ledger is run by many different people and companies, using a computer system. Well, of course, it will require special software to process transactions on the blockchain, and such computers are called ‘nodes’. These nodes can also be called Miners. When a Miner verifies any transaction, they are rewarded with a new Bitcoin. Hence a new Bitcoin is again created. This is called Bitcoin mining.
How to get Bitcoin?
• You can create it using a computer/nodes, called Mining.
• You can buy it with your real money.
• People can pay you with Bitcoin in exchange for any good or service provided.
After Bitcoin, many new blockchains were launched, collectively called ‘altcoins’. Such as Factom, Cardano, Litecoin. Most of these, with very minor changes, is just the alternative versions of Bitcoins and so got the name ‘altcoins’. But not all, some are totally different from Bitcoins. Factom is an altcoin that includes stakers and not miners for its making. Only one staker for one block. This is how it works and so it does not require much electricity. There are others like Ethereum and NEO, which are not even digital currency but you can create and make your own apps on the blockchain using them. Ethereum with its launch in 2015, came up with new technology, called a smart contract. It has the ability to automatically process the transaction during any specific situation. And these specific things are written into the smart contract. This is a very special quality of Ethereum, NEO, and such altcoins to tokenize the real things or situations and put them on the blockchain.
It includes WePower (WPR), Civic (CVC), BitDegree (BDG). Tokens are completely different from the other two types. Unlike, Bitcoins and Altcoins, Tokens do not have their own blockchain. These are used on decentralized apps (dApps). Often, people buy tokens to sell them later at a higher rate. But to make any transaction on dApp or to use a token, having the altcoins (Ethereum and NEO) is a must for the transaction fees as a token transaction is verified by the nodes on those altcoins’ blockchain.
Advantages and Disadvantages of Cryptocurrency and Bitcoin:-
• Security and Privacy
The transaction is recorded in the blockchain, a public ledger, which gives it transparency and so cannot be hacked. Also, its users have their digital wallet, accessible only by a private key, known only to the owner of the wallet.
• No interference of Government
Also called Decentralization, which is one of the biggest advantages. People only, will be in charge of their money and not any other authority. It will simply imply peer-to-peer network transactions, without getting the Government or any third party involved in it.
• Low fees
Cryptocurrency transactions or exchange costs very low, compared to other online transactions. They even sometimes, cost no fees at all.
As there is no third party involved in it, so the accessibility gets faster, for 24 hours a day, without any technical issue.
• Protection from Inflation
There is made a fixed amount of every cryptocurrency at the time of its launch. The source code specifies the amount of any coin. So, if the demand increases, its value will also increase and thus keeping up with the market and protecting from Inflation.
• Not Accepted Worldwide
Including India, not everywhere cryptocurrency is yet accepted and elsewhere, its value is very limited.
• No Refund Policy
One of the biggest disadvantages is the no refund policy or no cancellation policy, which even makes easier for scammers to fraud. There is no chance of any sort of mistake while doing any transaction, once it’s gone to a wrong person, its not coming back.
• Can be used for illegal activity
Cryptocurrency transaction’s is secured in such a way, that it will be not easy for the Government to track down by the user wallet address, which can even led to many illegal activities such as money laundering, tax-evasion etc.
• Data loss, Financial loss
You can’t afford to forget or lose your private key of your wallet. If you mistakenly lost it, you lost all your coins and your wallet will remain locked away along with all your coins in it, causing definitely a huge financial loss.
• Not Eco-friendly
Cryptocurrency, especially Bitcoin mining will put adverse effects on the environment. As it cannot be done on any ordinary computer but it requires advanced computers with lots of computational power and high electricity input.
How can you buy and sell Cryptocurrency?
One can buy these digital currencies through an international trading platforms such as Binance and Coinbase. However, some of the popular platforms in India like CoinDCX Go, WazirX, Zebpay, Coin switch Kuber has come up to try this new trend to allow users to buy and sell cryptocurrencies. All you got to do is sign up, just like any other platform, let the process of KYC be done, you could then easily transfer your money to your digital wallet and you are all set to make a purchase. You can start with the minimum amount of your choice, as there is no limit of anything as in, what and of how much to buy.
What can you do with Crypto?
In today’s world, I guess, nothing. You can’t buy yourself a car, a smartphone, or even a burger. But still, it holds value. People have been comparing it to Gold and Silver commodities. These digital coins in India are bought and stored as value, which people believe will be beneficial for them in the future.
Are Cryptocurrency and Bitcoin legal in India?
NO. As of now, there not has been any declaration to ban digital currency in the country as such. So, it’s not illegal but it is ‘unregulated’. And this has become a matter of concern for the Government that there is no regulating or governing body for it. This simply means that one can buy and sell bitcoin, or even hold it as an investment but no governing body is there to look after or protect it. No rules or guidelines have been set up yet in case of any dispute regarding it. This even gets people scared too. For Bitcoin, no regulation or authorization has yet been laid down in India. But that is what cryptocurrency is also about- not involving government or any central authority in between. Though the Indian Government had not been supporting the digital currency and has been showing some ‘not-so-friendly and opposing signs regarding it. In 2018, RBI kind of banned dealing with Cryptocurrency and sent circulars to all banks- not to give any service to any exchange, dealing in Crypto. In 2020, this circular was challenged in the Supreme Court. To which, Supreme Court gave its verdict and overruled the RBI’s ban of 2018. Lately, in March 2021, the Finance Minister, Nirmala Sitharaman said that there won’t be a complete ban on the use of cryptocurrencies in India. But the Centre is planning to formulate and introduce the “Cryptocurrency and Regulation of Official Digital Currency Bill, 2021. However, as of now, no update regarding the bill has come so far. Eventually, it’s expected that this year, the Central Authority will clear its take on the approval or denial of cryptocurrencies in the country.
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